cdhps + dm = population health? march 2006 john riedel mba, mph vince kuraitis jd, mba riedel &...

CDHPs + DM = Population Health?

March 2006

John Riedel MBA, MPH Vince Kuraitis JD, MBA Riedel & Associates Better Health Technologies(303) 697-0719 www.bhtinfo.com (208) 395-1197

http://www.bhtinfo.com/

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Outline of the Presentation

I. CDHP Background II. CDHPs Have Aspects That Are “DM Friendly” III. However, CDHPs Have Aspects That are NOT

“DM Friendly”

IV. Two Scenarios of How CDHPs and DM Come Together V. Developing “DM Friendly” CDHPs VI. Take Away Points

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Our Thesis in a Nutshell• Two purchasing trends are hot among employers:

– Consumer Driven Health Plans (CDHPs)– Disease Management (DM)

• Although these purchasing trends arose in isolation, they are merging.

• CDHPs have some “DM friendly” features and some that are NOT so “DM friendly”. Under current regulations, Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs) have vastly differing implications for DM.

• At this point, it is not clear ultimately how CDHPs and DM will come together. We see the potential for two divergent scenarios

– 1) DM + CDHPs = Population Health, or – 2) DM + CDHPs = Hell in a Handbasket.

• Today’s reality is:– HRAs allow active integration of DM.– Due to recent proposed legislative changes, HSAs are in limbo as to

their integration of DM.

• Information, Tools, and Incentives are the key mechanisms to facilitate appropriate integration of DM and CDHPs.

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Objectives of This Presentation

• Raise awareness of the inevitable convergence of two major trends:– CDHPs

– Disease Management

• Create awareness of the potential for conflict between:– The current trajectory of CDHP development

– The current trajectory of DM development

• Identify issues that are complex, controversial, and formative– Stimulate discussion

– NOT provide the final word

• Suggest ways to provide for synergistic development of DM within CDHPs

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“Extra! Extra!” There are 3 Recent Developments Affecting Status of DM in CDHPs!!!

1) Commonwealth/EBRI study provides first real evidence re: concerns about inappropriate cost reductions2) White House acknowledges need for legislation to reform "comparability" contribution requirements of HSAs. Should this be interpreted as:– a) a natural, free market evolution of CDHPs?

or– b) Acknowledgement that the purist, hard line view of

CDHPs -- "we want consumers to experience the true, full costs of health care" -- is flawed?

3) Even further polarization after Bush's State of the Union – some editorials cry out "HSAs are evil"

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I. CDHP Background

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Employers have 2 primary motivations for shifting toward CDHPs:

1) Cost control by shifting cost sensitivity to consumers. Employers want employees to experience the “true cost” of health care.

2) Encouraging informed consumerism by providing employees with financial incentives, health care information & tools to become more cost accountable and health outcomes conscious.

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There is Potential for Rapid Adoption of CDHPs

CDHP enrollment will reach 12 million members — almost 7% of the commercial market — in 2007

Total annual revenues from consumer-directed health plans, in premiums and premium equivalents paid by employers and employees

Year

CD

HP

pre

miu

ms

(US

$ m

illio

ns)

2000 2010

2000

$152 $393 $1,018 $2,568 $6,482 $16,186 $39,100 $87,750 $173,241 $289,502 $413,331

$500,000

$400,000

$300,000

$200,000

$100,000

$0

2001 2002

2002

2003 2004

2004

2005 2006

2006

2007 2008

2008

2009 2010

Consumer-directed health plans will account for $88 billion in 2007, a sixfoldincrease over 2005.

[Forrester, July 2005]

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Vendors “Shelves are Stocked” With CDHP Offerings

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• Early experience with CDHPs is generally positive

• Projections for CDHP enrollment range from modest to robust


HRA vs. HSA: Lots of HSA “Buzz” but Employers May Favor HRAs


II. CDHPs Have Aspects That Are “DM Friendly”


Employers Value DM as One of the Most Effective Cost-Containment Strategies


Some Aspects Of CDHPs Are Supportive Of DM

CDHPs and DM are eye-to-eye about the need for high-quality:

1)Consumer information

2)Consumer tools (supported by a robust, customized technological infrastructure)

3)Consumer incentives

Potentialforappropriatecostreduction


CDHP/DM Harmony

• Accurate, reliable information is a key to appropriate health care decisions by consumers– Evidence based guidelines– Quality & outcomes information about providers– etc.

• Patients need training in self-management approaches

• Ideally, information should be personalized based on patients’ knowledge, skills, beliefs, motivations, health literacy, and availability of psychosocial support

• Information delivery should be enhanced through a robust, user-friendly technological infrastructure– Shared decision making tools– Interactive web sites– etc.


The State-of-the-Art of: 1) Information,

2) Tools, & 3) Incentives:

IMMATURE

For example, a recent CapGemini report showed that many aspects of payer website functionality were in early stages of development [CapGemini, November 2004]


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THE COMMONWEALTH

FUND

Most Insured DonMost Insured Don’’t Have Quality and Cost t Have Quality and Cost Information to Make Informed ChoicesInformation to Make Informed Choices

36 (n = 76)15Doctors

32 (n = 76)14Hospitals

Of those whose plans provide info on cost, how many tried to use it for:

4525Hospitals

5442Doctors

Of those whose plans provide info on quality, how many tried to use it for:

1215Hospitals

1216Doctors

Health plan provides information on cost of care provided by:

1514Hospitals

16%14%Doctors

Health plan provides information on quality of care provided by:

HDHP/CDHPComprehensive

Source: P. Fronstin, S.R. Collins, Early Experience with High-Deductible and Consumer-Driven Health Plans: Findings From the EBRI/Commonwealth Fund Consumerism in Health Care Survey, EBRI Issue Brief, December 2005.


Provider Cost and Quality Information

100% of interviewed employers (n=10) said they were “were most concerned about the lack of provider information on quality and cost”


III. However, CDHPs Have Aspects That are NOT “DM

Friendly”


Some Aspects Of CDHPs Are NOT Supportive Of DM

Where CDHPs and DM are NOT eye-to-eye: Increased cost sharing creates the potential for patients to:

1) Defer needed care

2) Reduce adherence to prescribed treatment regimens

Potential forinappropriatecostreduction


6

THE COMMONWEALTH

FUND

Enrollees of HDHP/CDHPs Are More Enrollees of HDHP/CDHPs Are More Likely to Delay or Avoid Getting Health Likely to Delay or Avoid Getting Health

Care Due to CostCare Due to Cost

2621

17

42

313135

4840

0

20

40

60

Total Health Problem <$50,000 Annual

Income

Comprehensive HDHP CDHP


Percent of adults 21-64

(n = 61)

(n = 90)


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THE COMMONWEALTH

FUND

Enrollees of HDHP/CDHPs Are More Likely Enrollees of HDHP/CDHPs Are More Likely to Not Fill a Prescription Due to Costto Not Fill a Prescription Due to Cost

2027

2116

323326 2526

0

20

40

60

Total Health Problem <$50,000 Annual

Income

Comprehensive HDHP CDHP


Percent of adults 21-64

(n = 61)(n = 90)


RAND Study – Increasing Co-Pays Reduces Utilization of Rx

[JAMA; May 19, 2004}


Harris Interactive Survey – HDHP Consumers Have More Compliance Problems

[Source: Harris Interactive, 2005]


How Big a Deal is Adherence to Prescribed Treatments?

“Increasing the effectiveness of adherence interventions may have a far greater impact on the health of the population than any improvement in specific medical treatments.”

World Health Organization, 2001


HRAs vs. HSAs Have Vastly Different Implications For DM

• Health Reimbursement Arrangements (HRAs) allow employers more flexibility to structure benefits that are “DM friendly”.

– Employers have the option to structure first dollar coverage for a wide range of benefits. First dollar coverage allows for employers to pay for specific services e.g., preventive care, DM, with pre-deductible dollars.

– HRAs provide a transitional approach which is more appealing to larger, more sophisticated companies.


• Health Savings Accounts (HSAs) allow employers virtually no flexibility to structure benefits that are chronic care and/or “DM friendly”.– The underlying philosophy of HSAs is focused on exposing

employees to “true, full costs” of health care.– HSA regulations allow very limited flexibility for preferential

benefit structures, e.g., benefit structures that provide first dollar coverage and/or incentives for DM or related programs. HSAs allow minimal discretion to differentiate coverage among different health care components, e.g., Rx, hospitals, doctors, etc.

– HSA regulations do allow for first dollar coverage of preventive care. However, DM is not defined as preventive care.

– Employers generally view HSAs as a more potent CDHP vehicle because the savings feature encourages employees to view funds as “my money”.


While Treasury Regs Require “Comparable” Contributions to

Employee HSAs by Employers....

• “Employer contributions to an HSA based on an employee’s participation in health assessments, disease management program or wellness program do not have to satisfy the comparability rules if the employee may elect to receive that payment in currently taxable cash rather than having a nontaxable contribution to the HSA– Cafeteria plan nondiscrimination rules also apply”

• Translation: Employers are allowed to fund DM for the 10% who need it only if they give an equal amount of cash to the other 90%


....President Bush is On Record Supporting Legislation to Allow Employers to Make

Higher HSA Contributions to Chronically Ill Employees


IV. Two Scenarios of How CDHPs and DM Come Together

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Two Scenarios of DM and CDHPs

• DM + CDHPs = Population Health– Creating empowered, knowledgeable consumers– Benefit design encourages chronic care: lower copays,

first dollar coverage of DM tools (drugs), appropriate utilization of drugs

– Long-term adherence to evidence based treatment– HRAs

• DM + CDHPs = Hell in a hand basket– Cost reduction at any cost– Benefit design indifferent to chronic illness– Short-term cost shifting to consumers– HSAs (as currently structured)

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Today’s Reality

• HRAs allow active integration of DM.• Status of DM in HSAs in a state of limbo due to:

– White House acknowledgement that “comparability” contribution requirements need to be changed.

– Need to actually enact proposed changes. Can this happen in light of party (R vs. D) polarization?

– Need to develop evidence re: effects of changing the comparability contribution requirements – this will take years.


V. Developing “DM Friendly” CDHPs


The I,T,I’s of Disease Management Friendly CDHPs

• Information that is credible, accurate, and usable

• Tools for optimal utilization of consumer information

• Incentives for participation and behavior change


I, T, I Examples

• Information– Healthwise consumer information– Mayo HealthQuest– Micromedex

• Tools– Lumenos’ coaching resource – Health Dialog’s “just in time” information– Healthwise information therapy– Remote monitoring technology

• Incentives– Medco waiving deductibles for preventive medications– BenicompAdvantage providing $500 credit for lifestyle choices– Aetna provision of preventive drugs – Pitney-Bowes removal of financial barriers to appropriate drug utilization


Seek DM Friendly Features

– Under HRAs, providing first dollar coverage for routine treatment of chronic conditions, DM services, drugs used for chronic conditions.

– Allocating additional HRA dollars specifically to benefit individual employees with chronic conditions.

– “Bucketing” HRA funds for specific services with specific dollars that will not roll over. For example, employers could provide an incentive for employees to enroll in a DM program. A portion of the HRA funds, e.g., 20% of an employer contribution would not roll over at the end of the benefit period. This creates a “use it or lose it” incentive for employees.

– Creating a Flexible Spending Account (FSA) to cover routine treatment of chronic conditions, etc.

– Include drugs considered preventive into first dollar coverage tier.


2nd Generation CDHPs

• Our discussions with employers suggest that they are more focused on understanding, evaluating, and implementing the 1st Generation of CDHPs than they are in thinking about the 2nd Generation of CDHPs.

• However, a wide range of 2nd generation CDHP features are under consideration – mostly by consultants, vendors and thought-leaders.

• Some of these features could be used to create CDHPs that are more “DM friendly.”


VI. Take Away Points


• The potential exists for rapid adoption of CDHPs• Since employers value DM as an effective cost-containment

strategy, the integration of DM within CDHPs is essential. • CDHPs and DM are eye-to-eye on the need for high quality,

consumer-oriented decision support tools. Yet the quality and availability of consumer-oriented decision support tools is lacking.

• Increased cost-sharing by consumers leads to potential for deferring needed care and reducing adherence to prescribed treatment. We need to understand whether deferred care is appropriate.

• Employers, CDHP vendors, and others need to experiment with specific approaches and mechanisms to discover the best ways to integrate DM within CDHPs. Current Treasury Guidelines regarding HSA contributions limit options.


So, the next time you read a headline that says

“Studies show Acme CDHP reduces costs by 13.47%”

Ask

Was the reduction in costs appropriate or inappropriate?


AppendixReidel & Associates Consultants, Inc.

Better Health Technologies, LLC


Riedel & Associates Consultants, Inc. (R&ACI)

• John E. Riedel is the Founder and President of R&ACI. • R&ACI has been providing strategic consultation to

employers, managed care firms, pharmaceutical companies, hospitals and provider groups, and managed care vendors in the area of demand management for nine years.

• Through his employer surveys and training in demand management and health and productivity management John has worked with over 300 of the Fortune 1000 companies.

• Focusing on market research, product positioning, and evaluation design, R&ACI has worked with over 40 clients including Healthwise, Pacificare, Florida Hospital System, Merck-Medco Managed Care, Pharmacia, Sanofi-Aventis, Schering-Plough, American College of Occupational and Environmental Medicine, Pfizer, Quest Communications, Dow Chemical, Glaxo Smith Kline, Integrated Benefits Institute, and 15 Blue Cross and Blue Shield Plans.


Better Health Technologies, LLC

• Vince Kuraitis is founder and Principal of Better Health Technologies

• Creating value for patients and shareholders• Strategy, business models, partnerships• Disease/care management and e-health • Consulting/Business Development• E-Care Management News

– Complimentary e-newsletter– 3,000+ subscribers in 27 countries worldwide– Subscribe at www.bhtinfo.com/pastissues.htm


Better Health Technologies -- Clients

Pre-IPO CompaniesCardiobeat

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eCare Technologies

The Healan Group

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Established organizationsSamsung Electronics, South Korea -- Global Research Group -- Samsung Advanced Institute of Technology -- Digital Solution CenterIntel Digital Health GroupMedtronic -- Neurological Disease Management -- Cardiac Rhythm Patient ManagementSiemens Medical SolutionsJoslin Diabetes CenterNational Rural Electric Cooperative Association Disease Management Association of America Blue Cross Blue Shield of Massachusetts PCS Health SystemsVarian Medical SystemsVRIWashoe Health SystemS2 SystemsCorphealthPhysician IPACentocor


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cdhps + dm = population health? march 2006 john riedel mba, mph vince kuraitis jd, mba riedel &...

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